Japan's core inflation, measured as consumer prices excluding fresh food, rose 1.6% in June from a year earlier. This marks the first increase in the key inflation gauge since March and aligned with expectations. Despite the pickup, core inflation has remained below the Bank of Japan's 2% target for a fifth consecutive month, suggesting that firms have yet to aggressively pass rising input costs on to households.
The Bank of Japan is likely to maintain its warning next week regarding the risk of inflation overshooting its 2% target. However, the bank may signal that those risks have not increased significantly from three months ago.
The recent rise in inflation keeps the central bank on course for another interest-rate hike this year. Many economists anticipate a rate increase as soon as October or by the end of December, with further hikes potentially remaining in view through next year. Looking further ahead, analysts expect consumer inflation to accelerate later in 2026.